Citizen Watch Co., Ltd. is one the world's largest watchmakers. Although still best known for its watches, the company has since the mid-1960s diversified its product lines, expanding into clocks, jewelry, and eyeglass frames; electronic devices such as chip LEDs, liquid crystal displays, quartz oscillators, and electronic viewfinders; electronic products such as printers, disk drives, electronic thermometers, and calculators; and industrial machinery, including automatic computer-controlled lathes, robots, general-purpose machine tools, and measuring instruments. About 37 percent of Citizen's net sales are derived from watches, watch parts, and clocks, 33 percent from electronic devices, 7 percent from electronic products, 11 percent from industrial machinery, and the remaining from other products, which include jewelry, eyewear, jigs, and tools. Citizen generates 58 percent of its revenues outside of Japan.

ROOTS IN RESEARCH INSTITUTE IN 1918

Citizen began in Tokyo in 1918 as a horological research center, the Shokosha Watch Research Institute. In 1924 the institute manufactured its first pocket watch. Six years later, the group organized itself as a corporation, Citizen Watch Co., Ltd., to facilitate marketing of its products, under President Yosaburo Nakajima. The new company owed its name to Tokyo Mayor Shinpei Go-toh, who named Shokosha's first timepieces Citizen watches, so that they would, in his words, be "close to the hearts of people everywhere." In addition to watches, Citizen produced precision instruments used in their manufacture. In 1936 the company built the factory in the Tanashi area of Tokyo that remains its main production facility.

Also in 1936, Citizen began selling watches in
Southeast Asia and the South Pacific; China also became a destination for exports. The company's international horizons remained limited to other Asian countries until well after World War II. In fact, Citizen's export business dried up after the outbreak of hostilities with the United States, as the Japanese economy geared itself to meet military needs. In 1941 the company began producing machine tools, a business it retained.

After Japan's defeat by the Allied powers in 1945, Japanese industry lay in ruins, and Citizen, along with the rest of the nation, faced the task of rebuilding. That year, Shinji Nakajima took over company leadership as president. In March 1946, less than a year later, Eiinchi Yamada assumed the post. In 1949 Citizen established a subsidiary, Citizen Trading Co., Ltd., to handle domestic marketing. This move allowed the parent company to focus on manufacturing, research, and development. In 1953 Citizen entered into a joint venture with Rhythm Watch Co., Ltd., another Japanese timepiece manufacturer, to sell the latter's clocks.

The export market began to revive in the 1950s. In 1958 Citizen resumed exporting watches to China, and, two years later, it started selling its machine tools there. In 1960 the company entered the all-important American market by providing Bulova Watch with parts for watches to be assembled and sold in the United States. In 1962, Citizen resumed exporting watches to Southeast Asia, and, in 1965, opened a sales office in West Germany to export watches to Europe.

The timepiece industry in postwar Japan was all but monopolized by four companies: K. Hattori & Company, which produced the Seiko and Pulsar brands among others; Citizen; Ricoh; and Orient. In 1965 Hattori and Citizen by themselves accounted for more than 80 percent of Japanese watch production. Citizen also gained prominence in Japan for several technical advancements: developing Japan's first shock-resistant watch in 1956; marketing the nation's first wristwatch with an alarm in 1958 and also introducing the first Japanese water-resistant watch. Citizen also made a significant public relations gesture in donating 850 synchronized clocks for use in the Olympic Village at the 1964 Summer Olympics in Tokyo.

DIVERSIFYING AND EXPANDING OVERSEAS, 1960–1979

The Japanese timepiece industry hit a slump in the early 1960s, as increased competition, slack domestic demand, and rising production and personnel costs all squeezed profit margins. Ricoh and Orient gradually lost their status as watchmakers of consequence, leaving Citizen and Hattori in competition with each other. Diversification was one strategy for continued survival. In 1967 Citizen entered the gem and jewelry business, establishing a subsidiary, Citizen Jewelry, for that purpose. Citizen Jewelry later was merged into Citizen Trading Co., Ltd. Citizen also placed more emphasis on developing its line of business machines, which was launched in late 1964. The company established a precision machinery division in 1971 to manufacture such industrial equipment as precision lathes.

Another logical solution to the problem of sluggish domestic demand was to expand overseas business. In the 1960s Japanese watchmakers were not the kings of the export trade that they would become 20 years later. In 1967 Switzerland, known for its high-priced luxury watches, ranked first in the world in watch production; the Soviet Union, which produced cheap, generally inferior movements for sale in developing countries, ranked second; and Japan ranked third. It was not until the next year that Citizen established its first overseas subsidiary, a joint venture called Citizen de Mexico S.A. de C.V., which sold and later manufactured Citizen timepieces in Mexico. This was the first time that a Japanese watchmaker founded a joint venture for making and selling watches in a foreign country. In 1970 the company set up a subsidiary in Hong Kong, Sunciti Manufacturers Ltd., to produce cases and dial plates for mechanical watches. This venture was wholly owned by Citizen and its subsidiaries. Also in that year, Citizen and Bulova formed a joint venture, Bulova-Citizen, to produce tuning-fork watches for sale in Japan. Bulova held a majority stake in the new company, making it the first foreign-owned watch manufacturer that the Japanese government had allowed to take root in its own soil.

COMPANY PERSPECTIVES

As the names "Citizen Watch" or "Citizen Group" state, our policy is to provide the best products and services to all "citizens" in the world.

Citizen continued to diversify and pursue the export trade in the early 1970s. In 1972 the company entered the eyewear business as import and sales agency for Christian Dior frames. The company also entered the leisure-time business that year by converting its Yodobashi factory into a bowling alley and founding another subsidiary, Citizen Kohatsu Co., Ltd., to run it. Citizen Kohatsu also became involved in running skating rinks and tennis facilities. In 1973 Citizen founded another foreign subsidiary, Citizen Latinamerica Corp. The next year, Citizen established Citizen Uhrenfabrik G.m.b.H. to assemble watches in West Germany, and
the year after that it established Hanmi Citizen Precision Industry (later known as Citizen Precision of Korea Co., Ltd.) to manufacture watch casings in South Korea. By 1978 overseas production accounted for one-fourth of the company's total output of watches.

Nevertheless, Citizen continued second to Hattori in the 1970s, accounting for roughly 30 percent of Japanese watch production in a two-company industry. The American market was the ripest plum to be picked in the export trade; Citizen could not hope to match, much less surpass, its rival as long as its presence in the United States was only indirect, limited to parts that Bulova assembled and sold under its own name. Hattori's Seiko brand was achieving name recognition in the United States, but Citizen had none. In 1975 the company established a U.S. sales subsidiary, Citizen Watch Company of America, Inc., in Los Angeles; its headquarters later moved to New York City and then to Lyndhurst, New Jersey. Citizen sharply curtailed its parts shipments to Bulova and began selling in the United States under its own name.

American sales started out small, accounting for only 10 percent of Citizen's total sales in 1977. The company made significant inroads in the U.S. midpriced market with its quartz analog and multifunction digital watches, positioning itself for a run at overtaking Hattori. Citizen's success was a major part of the overall success of the Japanese timepiece industry; Japan became the world's second largest watchmaking nation by 1980, boasting a 21 percent share of the world market and shaving Switzerland's lead to a mere 1/2 percent. Swiss watchmakers refused to acknowledge the growing importance of electronic technology and failed to profit from it until late in the game. Citizen seemed to be on its way to carving out a comfortable niche within the U.S. market.

CONTENDING WITH LOW-PRICED WATCH COMPETITION

The digital watch boom that started in the mid-1970s changed the scene in the next decade. At first, the scenario seemed propitious for Citizen and Hattori. Although American semiconductor companies were the first to develop digital watch technology, they proved less than adept at exploiting it. By 1980, one-third of all watches sold in the United States were digital, but Fair-child Camera-Instrument, Intel, Litronix, and Motorola all had been driven out of the watch business. Texas Instruments was reeling from marketing problems. National Semiconductor was consolidating a modest stake, and venerable Timex found itself unable to get the hang of making digitals.

New players were entering the game to take advantage of this implosion. The old guard of the Far East found itself challenged by an energetic young Japanese rival, Casio Computer, and low-cost manufacturers based in Hong Kong and South Korea. All of these companies prospered by concentrating on the low-priced end of the market, producing a stream of simple, inexpensive, digital watches. These cheaper products proved popular enough to erode Citizen's and Hattori's market shares.

KEY DATES

1918:

Shokosha Watch Research Institute is founded in Tokyo.

1924:

Institute manufactures its first pocket watch.

1930:

Group organizes itself as a corporation, Citizen Watch Co., Ltd.

1936:

Citizen builds its Tanashi factory.

1960:

Company enters the U.S. market.

1964:

Line of business machines is launched.

1965:

Export of watches to Europe begins.

1971:

Precision machinery division is established.

1975:

U.S. sales subsidiary is established; the Citizen brand is introduced into the U.S. market.

1986:

Citizen becomes the world's largest watchmaker.

1992:

German machine tool maker Boley G.m.b.H. is acquired.

1996:

Eco-Drive watches debut.

1999:

Arch-rival Seiko Corporation surpasses Citizen as the world leader in watch movements.

Citizen countered by launching its own line of low-priced digitals, called Vega, but ultimately decided to concentrate on taking the midpriced market away from Hattori. Leadership of Citizen passed to Rokuya Yamazaki, who became president in 1981. In the 1980s Seiko became the best-selling watch brand in the United States, with Citizen ranked number two; in fact, they ranked first and second, respectively, in the world in timepiece sales and production. Yet the threat to market share from the makers of low-priced watches still had to be fended off. The Japanese electronics firm Sharp joined Casio in this business. In an effort to cope with the situation, the traditional rivals joined forces to cut manufacturing costs through economies of scale. In 1985 Citizen and Hattori Seiko Co., Ltd. (the name K. Hattori & Company had assumed in 1983) entered into an
agreement to supply each other with parts. Citizen would provide Seiko with hands and special driving devices and receive, in return, quartz oscillators, button batteries, springs, and other mechanical parts.

DIVERSIFYING FURTHER

Citizen also responded to the threat by further diversification. The company decided that non-timepiece products should eventually account for half of total sales, compared with 32 percent in 1985. Citizen expanded its information-equipment group, the descendant of its office-machine business; in 1984, it began exporting its printers and disc drives to the United States. In 1986, the year that Citizen surpassed Seiko in volume to become the world's largest watchmaker, the company introduced a new color liquid-crystal-display television that would spearhead its increased involvement in consumer electronics. The company also strengthened its machine tool and precision instrument businesses. In 1986 it joined with the U.S. manufacturer Perkin-Elmer to form Perkin-Elmer Citizen, a venture to produce and assemble analyzers and semiconductor processing devices in Japan. In 1987 Citizen established Citizen Systems, a research facility for developing new information equipment technology, in Los Angeles, and Citizen Manufacturing (UK) to manufacture printers in Great Britain. That same year, Michio Nakajima succeeded to the presidency.

Nakajima recognized that growth in the mature timepiece market was limited, and he immediately began to pursue diversification, especially in the fast-growing computer and computer-component markets. Citizen quickly became a respected supplier of laptop-computer components and floppy disc drives. Citizen also moved into the production of laptop computers themselves; this began in 1990 when the company started building the LTE notebook computer for Compaq Computer Corporation. In 1994 a similar arrangement began with Digital Equipment Corporation. The company continued to produce printers as well, including the portable PN 60 model, which debuted in November 1994 as the world's smallest, lightest printer.

Other diversification moves also took place in the late 1980s and early 1990s. In the area of electronic equipment, Citizen became much more active in the burgeoning area of electronic healthcare equipment, a sector it had entered in 1983 with the debut of an electronic thermometer. In 1991 the company launched its first digital blood pressure monitor, soon to be followed by antibacterial electric toothbrushes, pedometers, and bathroom scales. Citizen's industrial machinery operations launched the CRS/CRR series of precision industrial robots in October 1991. The company further bolstered its precision industrial sector through the 1992 acquisition of German machine tool maker Boley G.m.b.H. By the mid-1990s, Citizen had diversified enough that watch sales comprised only 45 percent of overall sales, a significant reduction from the two-thirds level of the mid-1980s.

Meanwhile, however, Citizen suffered from the difficult economic conditions of the early 1990s, which led to declines in both net sales and net income in the 1992, 1993, and 1994 fiscal years. In response the company moved aggressively to cut costs and improve productivity, mainly by shifting more manufacturing overseas, particularly to Hong Kong and China. In August 1994 Citizen Watch (China) Co., Ltd. was established to manufacture and sell watches, and by early 1997 nearly all of Citizen's watch case supplies were manufactured in either southern China or in Hong Kong. By 1996 Citizen had managed to cut production costs on its watch movements by almost 50 percent over the preceding five years.

LAUNCH OF ECO-DRIVE WATCHES

At the same time that it was cutting watch production costs, Citizen also sought to grab a larger share of the premium watch sector. May 1995 saw the debut of The Citizen line of limited-edition watch models, which were accurate to within five seconds a year, were water resistant to ten atmospheres, and came with a free ten-year after-sales service and lifetime repair warranty. In April 1996 Citizen launched its Eco-Drive watches, which featured a battery rechargeable from a brief exposure to light and never needing replacement. This new line proved extremely popular. Citizen also developed the world's first radio-controlled watch, which was able to pick up a low-frequency time signal broadcast by a Japanese government signal service to constantly reset itself to the correct time.

Improved economic conditions in the United States and strong sales in Southeast Asia helped Citizen recover somewhat during fiscal 1996, when profits increased 30 percent over the previous year. Ironically, after all the moves to diversify over the preceding decades, it was Citizen's watch segment that led the way in this resurgence.

Hiroshi Hakuta was appointed president in June 1997, becoming the first to attain that post from the non-watch side of Citizen's operations and the first with a background in engineering. The new leader had to contend with a particularly tough economic climate, not only the ongoing weakness in Japan but also the broader Asian economic crisis. Compounding the situation in
fiscal 1999 was an oversupply of watch movements and a sharp appreciation in the yen during the second half of the year, resulting in a steep decline in profits for the year. The company concentrated much of its efforts on reducing manufacturing costs during this period, but did so without shifting any production of its watch movements outside of Japan. Citizen reorganized and integrated its network of domestic plants and unified the plants' materials purchasing and parts design. It also continued to roll out dozens of new models of its very successful Eco-Drive line. In the meantime, Seiko Corporation (as Hattori Seiko had been known since 1990) jumped past Citizen as the world's largest producer of watch movements in 1999.

RESTRUCTURING

In the early 2000s Citizen faced a new challenge as sales of watches flattened, particularly in Japan, because of the proliferation of cellular phones and other portable electronics devices, which typically had built-in clocks, making watches less of a necessity. Demand for Citizen watches in North America, however, remained robust as the Eco-Drive models were particularly well received and were generating one-third of North American revenues by 2000. By this time, watch operations were responsible for less than 40 percent of global revenues as the company's diversification drive continued. In 2000 Citizen was bolstered by strong sales of crystal oscillators, LCD modules, and chip-based LEDs for PCs and portable electronics.

In 2001 Citizen's performance weakened thanks to economic downturns in Japan and North America and the slumping information technology industry. Citizen responded with an aggressive restructuring program, launched in October 2001, that included a workforce reduction of 2,000, or about 20 percent, as part of a broader cost-cutting program. Restructuring charges of ¥7.7 billion ($58 million) coupled with ¥6 billion ($45.2 million) in appraisal losses on company shareholdings contributed to a net loss for fiscal 2002 of ¥12.6 billion ($94.7 million), its first in 46 years.

Makoto Umehara, appointed president in June 2002, led Citizen Watch through a period of further restructuring. Between 2002 and 2005 the company implemented numerous changes to its network of subsidiaries and affiliates involved in manufacturing, distribution, and sales, both at home and abroad. For example, Citizen Trading was made into a wholly owned subsidiary in 2002, and then this sales unit was merged into the parent company in October 2004 in order to integrate the watch manufacturing and sales operations. In late 2005 Citizen sought to further improve the efficiency of its group operations by purchasing full control of three subsidiaries that had been listed on the Jasdaq stock exchange: Citizen Electronics Co., Ltd., a manufacturer of electronic devices; Miyota Co., Ltd., which was involved in watch assembly and making quartz oscillators and electronic viewfinders; and Cimeo Precision Co., Ltd., producer of crystal quartz elements, watch parts, magnets, and magnetic head cores.

As these and other reforms were carried out, Citizen Watch enjoyed three consecutive years of improving profits from fiscal 2003 through fiscal 2005. Sales declined in both fiscal 2005 and 2006, however, and net income fell 8.1 percent in the latter year because of a slump in the firm's electronic device business. Watch sales, by contrast, were improving thanks to several strategies: further developing the Eco-Drive lines; rolling out radio-controlled watches to the European, American, and Chinese markets; and adopting a multibrand approach encompassing the flagship Citizen mark in the midpriced segment and the Vagary brand for low-priced watches. The Vagary brand had been purchased from an Italian manufacturer in the 1990s. Citizen was also fighting back against the cell phone onslaught by adding features to its watches that might provide an incentive for people to wear them. For instance, in June 2006 Citizen announced that it had developed a wristwatch with an integrated Bluetooth interface able to wireless communicate with a cell phone and indicate when a call was being received, by vibrating, lighting up, and displaying the party's name and number. Through such new products, Citizen hoped to stay on the technological cutting edge and retain its place as one of the world's watch leaders, while continuing to augment its position in electronic devices and products.

Citizen Watch Co., Ltd. is the world’s largest watchmaker, responsible for about 22 percent of total world watch production, which in fiscal 1996 amounted to 240 million watches. Although watches remain the mainstay of the company’s operations, Citizen has increasingly diversified its product lines since the late 1960s, expanding into clocks, jewelry, and eyeglass frames; computers, printers, and floppy disk drives; small televisions, electronic health care equipment (such as thermometers and blood pressure monitors), and other electronic devices; and precision lathes, assembly robots, measuring instruments, and other industrial machinery. About 45 percent of Citizen’s net sales are derived from watches and watch parts, with about nine percent from clocks and jewelry, about 17 percent from information products, about 15 percent from electronic products, and about ten percent from industrial machinery.

Roots in Research Institute in 1918

Citizen began in Tokyo in 1918 as a horological research center, the Shokosha Watch Research Institute. In 1924 the institute manufactured its first pocket watch. Six years later, the group organized itself as a corporation, Citizen Watch Co., Ltd., to facilitate marketing of its products, under President Yosaburo Nakajima. The new company owed its name to Tokyo mayor Shinpei Gotoh, who named Shokosha’s first timepieces Citizen watches, so that they would, in his words, be “close to the hearts of people everywhere.” In addition to watches, Citizen produced precision instruments used in their manufacture. In 1936 the company built the factory in the Tanashi area of Tokyo that remains its main production facility.

Also in 1936, Citizen began selling watches in southeast Asia and the South Pacific; China also became a destination for exports. The company’s international horizons remained limited to other Asian countries until well after World War II. In fact, Citizen’s export business dried up after the outbreak of hostilities with the United States, as the Japanese economy geared itself to meet military needs. In 1941 the company began producing machine tools, a business it retained.

After Japan’s defeat by the Allied powers in 1945, Japanese industry lay in ruins, and Citizen, along with the rest of the nation, faced the task of rebuilding. That year, Shinji Nakajima took over company leadership as president. In March 1946, less than a year later, Eiinchi Yamada assumed the post. In 1949 Citizen established a subsidiary, Citizen Trading Co., Ltd., to handle domestic marketing. This move allowed the parent company to focus on manufacturing, research, and development. In 1953 Citizen entered into a joint venture with Rhythm Watch Co., Ltd., another Japanese timepiece manufacturer, to sell the latter’s clocks.

The export market began to revive in the 1950s. In 1958 Citizen resumed exporting watches to China, and, two years later, it started selling its machine tools there. In 1960 the company entered the all-important American market by providing Bulova Watch with parts for watches to be assembled and sold in the United States. In 1962, Citizen resumed exporting
watches to southeast Asia, and, in 1965, opened a sales office in West Germany to export watches to Europe.

The timepiece industry in postwar Japan was all but monopolized by four companies: K. Hattori & Company, which produced the Seiko and Pulsar brands among others; Citizen; Ricoh; and Orient. In 1965, Hattori and Citizen by themselves accounted for more than 80 percent of Japanese watch production. Citizen also gained prominence in Japan for several technical advancements: developing Japan’s first shock-resistant watch in 1956; marketing the nation’s first wristwatch with an alarm in 1958; and in 1958 introducing the first Japanese water-resistant watch. Citizen also made a significant public relations gesture in donating 850 synchronized clocks for use in the Olympic Village at the 1964 Summer Olympics in Tokyo.

Diversified and Expanded Overseas in the 1960s and 1970s

The Japanese timepiece industry hit a slump in the early 1960s, as increased competition, slack domestic demand, and rising production and personnel costs all squeezed profit margins. Ricoh and Orient gradually lost their status as watchmakers of consequence, leaving Citizen and Hattori in competition with each other. Diversification was one strategy for continued survival. In 1967 Citizen entered the gem and jewelry business, establishing a subsidiary, Citizen Jewelry, for that purpose. Citizen Jewelry later was merged into Citizen Trading Co., Ltd. Citizen also placed more emphasis on developing its line of business machines, which was launched in 1965. And the company established a precision machinery division in 1971 to manufacture such industrial equipment as precision lathes.

Another logical solution to the problem of sluggish domestic demand was to expand overseas business. In the 1960s Japanese watchmakers were not the kings of the export trade that they would become 20 years later. In 1967 Switzerland, known for its high-priced luxury watches, ranked first in the world in watch production; the Soviet Union, which produced cheap, generally inferior movements for sale in developing countries, ranked second; and Japan ranked third. It was not until the next year that Citizen established its first overseas subsidiary, a joint venture called Citizen de Mexico S.A. de C.V., which sold and later manufactured Citizen timepieces in Mexico. This was the first time that a Japanese watchmaker founded a joint venture for making and selling watches in a foreign country. In 1970 the company set up a subsidiary in Hong Kong, Sunciti Manufacturers Ltd., to produce cases and dial plates for mechanical watches. This venture was wholly owned by Citizen and its subsidiaries. Also in that year, Citizen and Bulova formed a joint venture, Bulova-Citizen, to produce tuning-fork watches for sale in Japan. Bulova held a majority stake in the new company, making it the first foreign-owned watch manufacturer that the Japanese government had allowed to take root in its own soil.

Citizen continued to diversify and pursue the export trade in the early 1970s. In 1972 the company entered the eyewear business as import and sales agency for Christian Dior frames. The company also entered the leisure-time business that year by converting its Yodobashi factory into a bowling alley and founding another subsidiary, Citizen Kohatsu Co., Ltd., to run it. Citizen Kohatsu also became involved in running skating rinks and tennis facilities. In 1973 Citizen founded another foreign subsidiary, Citizen Latinamerica Corp. The next year, Citizen established Citizen Uhrenfabrik G.m.b.H. to assemble watches in West Germany, and the year after that it established Hanmi Citizen Precision Industry (later known as Citizen Precision of Korea Co., Ltd.) to manufacture watch casings in South Korea. By 1978 overseas production accounted for one-fourth of the company’s total output of watches.

Nevertheless, Citizen continued second to Hattori in the 1970s, accounting for roughly 30 percent of Japanese watch production in a two-company industry. The American market was the ripest plum to be picked in the export trade; Citizen could not hope to match, much less surpass, its rival as long as its presence in the United States was only indirect, limited to parts that Bulova assembled and sold under its own name. Hattori’s Seiko brand was achieving name recognition in the United States, but Citizen had none. In 1975 the company established a U.S. sales subsidiary, Citizen Watch Company of America, Inc., in Los Angeles; its headquarters later moved to New York City and then to Lyndhurst, New Jersey. Citizen sharply curtailed its parts shipments to Bulova and began selling in the United States under its own name.

American sales started out small, accounting for only ten percent of Citizen’s total sales in 1977. The company made significant inroads in the U.S. midpriced market with its quartz analog and multifunction digital watches, positioning itself for a run at overtaking Hattori. Citizen’s success was a major part of the overall success of the Japanese timepiece industry; Japan became the world’s second largest watchmaking nation by 1980, boasting a 21 percent share of the world market and shaving Switzerland’s lead to a mere ½ percent. Swiss watchmakers refused to acknowledge the growing importance of electronic technology and failed to profit from it until late in the game. Citizen seemed to be on its way to carving out a comfortable sinecure within the U.S. market.

Company Perspectives:

Citizen’s mission is to supply better products and services to citizens all over the world. Citizen offers a wide variety of watches and precision high-tech products that fulfill the diversified needs of users worldwide. Creating products “Close to the Hearts of People Everywhere” is Citizen’s corporate philosophy.

Faced Low-Priced Watch Competition in Late 1970s and Early 1980s

The digital watch boom that started in the mid-1970s changed the scene in the next decade. At first, the scenario seemed propitious for Citizen and Hattori. Although American semiconductor companies were the first to develop digital watch technology, they proved less than adept at exploiting it. By 1980, one-third of all watches sold in the United States were digital, but Fairchild Camera & Instrument, Intel, Litronix, and
Motorola all had been driven out of the watch business. Texas Instruments was reeling from marketing problems. National Semiconductor was consolidating a modest niche, and venerable Timex found itself unable to get the hang of making digitals.

New players were entering the game to take advantage of this implosion. The old guard of the Far East found itself challenged by an energetic young Japanese rival, Casio Computer, and low-cost’ manufacturers based in Hong Kong and South Korea. All of these companies prospered by concentrating on the low-priced end of the market, producing a stream of simple, inexpensive, digital watches. These cheaper products proved popular enough to erode Citizen’s and Hattori’s market shares.

Citizen countered by launching its own line of low-priced digitals, called Vega, but ultimately decided to concentrate on taking the midpriced market away from Hattori. Leadership of Citizen passed to Rokuya Yamazaki, who became president in 1981. In the 1980s Seiko became the best-selling watch brand in the United States, with Citizen ranked number two; in fact, they ranked first and second, respectively, in the world in timepiece sales and production. Yet the threat to market share from the makers of low-priced watches still had to be fended off. The Japanese electronics firm Sharp joined Casio in this business. In an effort to cope with the situation, the traditional rivals joined forces to cut manufacturing costs through economies of scale. In 1985 Citizen and Hattori Seiko (the name K. Hattori & Company had assumed in 1985) entered into an agreement to supply each other with parts. Citizen would provide Seiko with hands and special driving devices and receive, in return, quartz oscillators, button batteries, springs, and other mechanical parts.

Diversified Further in the Late 1980s and 1990s

Citizen also responded to the threat by further diversification. The company decided that non-timepiece products should eventually account for half of total sales, compared with 32 percent in 1985. Citizen expanded its information-equipment group, the descendant of its office-machine business; in 1984, it began exporting its printers and disc drives to the United States. In 1986, the year that Citizen surpassed Seiko in volume to become the world’s largest watchmaker, the company introduced a new color liquid-crystal-display television that would spearhead its increased involvement in consumer electronics. The company also strengthened its machine tool and precision instrument businesses. In 1986, it joined with the American manufacturer Perkin-Elmer to form Perkin-Elmer Citizen, a venture to produce and assemble analyzers and semiconductor processing devices in Japan. In 1987 Citizen established Citizen Systems, a research facility for developing new information equipment technology, in Los Angeles, and Citizen Manufacturing (UK) to manufacture printers in Great Britain. That same year, Michio Nakajima succeeded to the presidency.

Nakajima recognized that growth in the mature timepiece market was limited and he immediately began to pursue diversification, especially in the fast-growing computer and computer-component markets. Citizen quickly became a respected supplier of laptop-computer components and floppy disc drives. Citizen also moved into the production of laptop computers themselves; this began in 1990 when the company began to build the LTE notebook computer for Compaq. In 1994 a similar arrangement began with Digital Equipment Corp. The company continued to produce printers as well, including the portable PN 60 model, which debuted in November 1994 as the world’s smallest, lightest printer.

Other diversification moves also took place in the late 1980s and early 1990s. In the area of electronic equipment, Citizen became much more active in the burgeoning area of electronic health care equipment, a sector it had entered in 1983 with the debut of an electronic thermometer. In 1991 the company launched its first digital blood pressure monitor, soon to be followed by antibacterial electric toothbrushes, pedometers, and bathroom scales. Citizen’s industrial machinery operations launched the CRS/CRR series of precision industrial robots in October 1991. The company further bolstered its precision industrial sector through the 1992 acquisition of German machine tool maker Boley G.m.b.H. By the mid-1990s, Citizen had diversified enough that watch sales comprised only 45 percent of overall sales, a significant reduction from the two-thirds level of the mid-1980s.

Meanwhile, however, Citizen suffered from the difficult economic conditions of the early 1990s, which led to declines in both net sales and net income in the 1992, 1993, and 1994 fiscal years. In response the company moved aggressively to cut costs and improve productivity, mainly by shifting more manufacturing overseas, particularly to Hong Kong and China. In August 1994 Citizen Watch (China) Co., Ltd. was established to manufacture and sell watches, and by early 1997 nearly all of Citizen’s watch case supplies were manufactured in either southern China or in Hong Kong. By 1996 Citizen had managed to cut production costs on its watch movements—the electronic hearts of watches—by almost 50 percent over the preceding five years.

At the same time that it was cutting watch production costs, Citizen also sought to grab a larger share of the premium watch sector. May 1995 saw the debut of The Citizen line of limited edition watch models, which were accurate to within five seconds a year, were water resistant to ten atmospheres, and came with a free ten-year after-sales service and lifetime repair warranty. Further diversification came in September 1996 when the Carrera golf club was introduced.

Improved economic conditions in the United States and strong sales in southeast Asia helped Citizen recover somewhat during fiscal 1996, when profits increased 30 percent over the previous year. Ironically, after all the moves to diversify over the preceding decades, it was Citizen’s watch segment that led the way in this resurgence. As it neared the 21st century under the new leadership of Hiroshi Hakuta, appointed president in June 1997, Citizen Watch seemed certain to maintain the top position in watches for years to come and was well positioned to profit when the Japanese economy finally recovered from its extended slump.

Citizen Watch Co., Ltd., the second-largest watchmaker in Japan, and in the world, has diversified its product lines. It now manufactures and markets computer peripherals, jewelry, eyewear, industrial machine tools, and precision instruments, but making timepieces, remains its primary enterprise.

Citizen began in Tokyo in 1918 as a horological research center, the Shokosha Watch Research Laboratory. In 1924 the laboratory manufactured its first pocket watch. Six years later, the group organized itself as a corporation, Citizen Watch Company, to facilitate marketing of its products, under President Yosaburo Nakajima. The new company owed its name to Tokyo mayor Shinpei Gotoh, who named Shokosha Lab’s first timepieces Citizen watches, so that they would, in his words, be “close to the hearts of people everywhere.” In addition to watches. Citizen produced precision instruments used in their manufacture. In 1935 the company built the factory in the Tanashi area of Tokyo that remains its main production facility.

In 1936, Citizen began selling watches in Southeast Asia and the South Pacific; China also became a destination for exports. The company’s international horizons remained limited to other Asian countries until well after World War II. In fact, Citizen’s export business dried up after the outbreak of hostilities with the United States, as the Japanese economy geared itself to meet military needs. In 1941, the company began producing machine tools, a business it has retained.

After Japan’s defeat by the Allied powers in 1945, Japanese industry lay in ruins, and Citizen, along with the rest of the nation, faced the task of rebuilding. That year, Shinji Nakajima took over company leadership as president. In March 1946, less than a year later, Eiinchi Yamada assumed the post. In 1949, Citizen established a subsidiary, Citizen Trading Company, to handle domestic marketing. This move allowed the parent company to focus on manufacturing, research, and development. In 1953 Citizen entered into a joint venture with Rhythm Watch, another Japanese timepiece manufacturer, to sell the latter’s clocks.

The export market began to revive in the 1950s. In 1958, Citizen resumed exporting watches to China, and, two years later, it started selling its machine tools there. In 1960, the company entered the all-important American market by providing Bulova Watch with parts for watches to be assembled and sold in the United States. In 1962, Citizen resumed exporting watches to Southeast Asia, and, in 1965, opened a sales office in West Germany, in order to export watches to Europe.

The timepiece industry in postwar Japan was all but monopolized by four companies: K. Hattori & Company, which produced the Seiko and Pulsar brands among others; Citizen; Ricoh; and Orient. In 1965, Hattori and Citizen by themselves accounted for more than 80% of Japanese watch production. Citizen also gained prominence in Japan for several technical advancements: developing Japan’s first shock-resistant watch in 1956; marketing the nation’s first wristwatch with an alarm in 1958; and, in the late 1950s, developing the first Japanese water-resistant watch. Citizen also made a significant public relations gesture in donating 850 synchronized clocks for use in the Olympic Village at the 1964 Summer Olympics in Tokyo.

The Japanese timepiece industry hit a slump in the early 1960s, as increased competition, slack domestic demand, and rising production and personnel costs all squeezed profit margins. Ricoh and Orient gradually lost their status as watchmakers of consequence, leaving Citizen and Hattori in competition with each other. Diversification was one strategy for continued survival. In 1967, Citizen entered the gem and jewelry business, establishing a subsidiary, Citizen Jewelry, for that purpose. Citizen Jewelery later was merged into Citizen Trading Company. Citizen also placed more emphasis on developing its line of business machines.

Another logical solution to the problem of sluggish domestic demand was to expand overseas business. In the 1960s Japanese watchmakers were not the kings of the export trade that they would become 20 years later. In 1967, Switzerland—known for its high-priced luxury watches—ranked first in the world in watch production, the Soviet Union— which produced cheap, generally inferior movements for sale in developing countries—second, and Japan third. It was not until the next year that Citizen established its first overseas subsidiary, a joint venture called Citizen de Mexico, which sold and later manufactured Citizen timepieces in Mexico. This was the first time that a Japanese watchmaker founded a joint venture for making and selling watches in a foreign country. In 1970 the company set up a subsidiary in Hong Kong, Sunciti Manufacturers, to produce cases and dial plates for mechanical watches. This venture was wholly owned by Citizen and its subsidiaries. Also in that year, Citizen and Bulova formed a joint venture, Bulova-Citizen, to produce tuning-fork watches for sale in Japan. Bulova held a majority stake in the new company, making it the first foreign-owned watch manufacturer that the Japanese government had allowed to take root in its own soil.

Citizen continued to diversify and pursue the export trade in the early 1970s. In 1972 the company entered the eyewear
business as import and sales agency for Christian Dior frames. The company also entered the leisure-time business that year by converting its Yodobashi factory into a bowling alley and founding another subsidiary, Citizen Kohatsu, to run it. Citizen Kohatsu also became involved in running skating rinks and tennis facilities. In 1973, Citizen founded another foreign subsidiary, Citizen Latinamerica. The next year, Citizen established Citizen Uhrenfabrik to assemble watches in West Germany, and the year after that, Hanmi Citizen Precision Industry to manufacture watch casings in South Korea. By 1978, overseas production accounted for one-fourth of the company’s total output of watches.

Nevertheless, Citizen continued second to Hattori in the 1970s, accounting for roughly 30% of Japanese watch production in a two-company industry. The American market was the ripest plum to be picked in the export trade; Citizen could not hope to match, much less surpass, its rival as long as its presence in the United States was only indirect, limited to parts that Bulova assembled and sold under its own name. Hattori’s Seiko brand was achieving name recognition in the United States, but Citizen had none. In 1975, the company established a U.S. sales subsidiary, Citizen Watch Company of America, in Los Angeles; its headquarters moved to New York City later. Citizen sharply curtailed its parts shipments to Bulova and began selling in the United States under its own name.

American sales started out small, accounting for only 10% of Citizen’s total sales in 1977. The company made significant inroads in the U.S. midpriced market with its quartz analog and multifunction digital watches, positioning itself for a run at overtaking Hattori. Citizen’s success was a major part of the overall success of the Japanese timepiece industry; Japan became the world’s second-largest watchmaking nation by 1980, boasting a 21% share of the world market and shaving Switzerland’s lead to a mere ½%. Swiss watchmakers refused to acknowledge the growing importance of electronic technology and failed to profit from it until late in the game. Citizen seemed to be on its way to carving out a comfortable sinecure within the U.S. market.

The digital watch boom that started in the mid-1970s changed the scene in the next decade. At first, the scenario seemed propitious for Citizen and Hattori. Although American semiconductor companies were the first to develop digital watch technology, they proved less than adept at exploiting it. By 1980, one-third of all watches sold in the U.S. were digital, but Fairchild Camera & Instrument, Intel, Litronix, and Motorola had all been driven out of the watch business. Texas Instruments was reeling from marketing problems. National Semiconductor was consolidating a modest niche, and venerable Timex found itself unable to get the hang of making digitals.

New players were entering the game to take advantage of this implosion. The old guard of the Far East found itself challenged by an energetic young Japanese rival, Casio Computer, and low-cost manufacturers based in Hong Kong and South Korea. All of these companies prospered by concentrating on the low-priced end of the market, producing a stream of simple, inexpensive, digital watches. These cheaper products proved popular enough to erode Citizens’s and Hattori’s market shares.

Citizen countered by launching its own line of low-priced digitals, called Vega, but ultimately decided to concentrate on taking the midprice market away from Hattori. Leadership of Citizen passed to Rokuya Yamazaki, who became president in 1981. In the 1980s Seiko became the best-selling watch brand in the United States, with Citizen ranked number two; in fact, they ranked first and second, respectively, in the world in timepiece sales and production. Yet the threat to market share from the makers of low-priced watches still had be fended off. The Japanese electronics firm Sharp joined Casio in this business. In an effort to cope with the situation, the traditional rivals joined forces to cut manufacturing costs through economies of scale. In 1985 Citizen and Hattori Seiko—the name K. Hattori & Company had assumed in 1985—entered into an agreement to supply each other with parts. Citizen would provide Seiko with hands and special driving devices and receive, in return, quartz oscillators, button batteries, springs, and other mechanical parts.

Citizen also responded to the threat by further diversification. The company decided that non-timepiece products should eventually account for half of total sales, compared to 32% in 1985. Citizen expanded its information-equipment group, the descendant of its office-machine business; in 1984, it began exporting its printers and disc drives to the United States. In 1986—the year that Citizen supassed Seiko in volume to become the world’s largest watchmaker—the company introduced a new color liquid-crystal-display television that would spearhead its increased involvement in consumer electronics. The company also strengthened its machine tool and precision instrument businesses. In 1986, it joined with the American manufacturer Perkin-Elmer to form Perkin-Elmer Citizen, a venture to produce and assemble analyzers and semiconductor processing devices in Japan. In 1987, Citizen established Citizen Systems, a research facility for developing new information equipment technology, in Los Angeles, and Citizen Manufacturing (UK) to manufacture printers in Great Britain. That same year, Michio Nakajima succeeded to the presidency.

Nakajima recognized that growth in the mature timepiece market was limited, and immediately began to pursue diversification, especially in the fast-growing computer and computer-component markets, Citizen quickly became a respected supplier of laptop-computer components and disc drives. “Citizen executives now strongly feel that... diversification is the only way for survival,” wrote a correspondent for The Japan Economic Journal, July 5, 1986. At the same time, the new products on which Citizen has pinned its hopes depend heavily on their reception in overseas markets, particularly the American market. The strength that the yen acquired relative to the U.S. dollar and other currencies in the mid-1980s has made Japanese goods more expensive to buy in the United States, threatening their market shares. It would appear that Citizen’s long-term viability has become dependent on exchange-rate fluctuations and the vagaries of international trade, an area in which politicians, rather than market forces, are operating. Making watches brought Citizen success in its first 60 years. Diversification may be the key to success in its future years.